What if you could own a stake in Harry Potter?
What if the book series functioned like a publicly traded company where individuals could “buy stock” in it, and as the franchise grows, those “stocks” become more valuable? If this were the case, someone who purchased just three percent of Harry Potter back when there was only one book would be a billionaire now.
Just imagine how that would affect the reading experience. Suddenly a trip to Barnes & Noble becomes an investment opportunity. Early readers could spot “the next big thing” and make a $100 contribution that becomes $10,000 or even $100,000 if the book’s popularity grows. If readers could own a percentage of the franchise, they might then be incentivized to help that book succeed. They could start a TikTok account to promote the book via BookTok, or use their talents as filmmakers to adapt it to the screen. All of this stands to increase the value of their original investment.
“Imagine when all of an author’s readers can suddenly make money as well,” says Margarita Guerrero, head of partner and publishing relations at the publishing startup Readl. “How much more would they be engaged?”
This is the future an emerging number of publishing startups are after—aiming to change the value of a book from a $10 Amazon purchase to a $100 investment opportunity, while creating a market of readers excited to see the books they love succeed. It might not work—finding readers (and investors) will be a challenge—but if they succeed, their vision could bode very well for the author who, in this scenario, could retain a percentage ownership of these “stocks” and earn value alongside their investors—just like Jeff Bezos retains a percentage of Amazon stock and grows richer as his company’s shares gain value.
This is a middleground compared to how it works today. Typically a book’s rights are owned by a publishing house (if traditionally published) or by the author (if self-published), but these startups imagine a third option—where authors and investors jointly own the copyright—that could be made possible by technology known as the blockchain. Hailed by many as “the future of the internet,” the blockchain is a digital ledger where “blocks” of information are added to a “chain” of them, but never removed. This creates a ledger of information that is publically stored on a distributed network and accessible by anyone. Imagine, for example, if I could see a ledger of every single person who owned my home—when I bought it, a new block was added verifying that I am the current owner. Describing it this way is a bit like describing the internet as “a bunch of servers in air conditioned rooms where information can be stored and accessed with a computer.” What’s more important than how it’s achieved technically is what can be done with it. If the internet gives us unfettered access to information, then the blockchain allows us to own it.
Often referred to as “the web version 3.0” or “web3” (the internet being “web2”), the idea here is that digital information—a viral YouTube video, an album on Spotify, or a book—could be owned. That ownership could confer rights—to earn “royalties” as that YouTube video gains views, as an album gets streamed, or as a book gets read.
“That's the beauty of web3,” Guerrero says. “At the end of the day, it's all about ownership, and if you own something, you have the right to resell it. You have the right to lend it. For the first time in history, the author of the IP will always get something back.”
In theory, this could be very exciting for authors. In practice, outside of runaway success stories like Harry Potter, very few books earn enough revenue for an investor to want to get involved. Whether traditionally published or self-published, right now, the industry is dependent on book sales. This means that authors and publishing houses hope to make their money selling thousands of book copies at a relatively modest price. Here’s the problem: books typically don’t sell well. According to Bookstat, there were 2.6 million books added to the market in 2020, and 96 percent of them sold fewer than 1,000 copies. Worse still, only 268 sold more than 100,000 copies. With that kind of economics, very few authors earn a living solely through writing and publishing books. The author Emily Segal wants to change that.
After selling around 5,000 copies of her first book, Mercury Retrograde, Segal realized that she needed a better way to fund her second one. “I was starting to work on developing the plot of the book and was completely frying my brain trying to jump in and out of working on that and doing other projects,” Segal says. “It was really bumming me out because I was so excited about the book and so motivated to work on it, but then I kept getting interrupted.”
Wanting to try something different, in April 2021, Segal launched a crowdfund for her book Burn Alpha using Mirror, a publishing platform that allows writers to crowdfund using the cryptocurrency ethereum (or ETH). In one day, she raised an unprecedented 25 ETH from just 104 investors—the equivalent of about $52,000 at the time.
“When I got the funding, it made it much easier to focus on the book for longer periods without feeling a lot of financial stress around that,” she says. “It meant that I got to spend oodles of time committed to developing the book, which has been great.”
Crowdfunds aren’t exactly new. Since its inception in 2009, Kickstarter has seen 631 publishing projects raise more than $50,000; four projects have raised more than a million dollars. But if in a traditional crowdfund fans are making donations in exchange for a product, in a web3 crowdfund, backers are making investments. They actually fund a project, which attracts a particular brand of ethereum-rich early adopters on the lookout for investment opportunities.
“It's not just about the mechanics of being able to do a crowdfund,” Segal says. “It's about making sure it gets in front of people who are interested in what you're doing and interested in contributing.”
Segal’s backers read like a who’s who of web3 investors. Excited to be part of an investor-backed book, Segal attracted investors like Andreessen Horowitz (a venture capitalist firm) general partner Chris Dixon, Zora (an NFT marketplace) co-founder Jacob Horne, and a smattering of Mirror employees—without a lot of recruiting effort on her part.
“There were definitely people that I knew personally who contributed, which was fabulous, but not the big VC peeps,” Segal says. “I do think people were excited that it was the first [web3] book, and I was very conscious of that. People, especially those in a tech adjacent world, love ‘firsts.’”
In a crypto crowdfund, what those “first” investors get is tokens. Tokens act like our “stock” here in that the number of tokens a person owns compared to the total number in existence determine what percentage of a book’s shares an investor owns. Mirror allows authors to choose the ownership percentage they wish to retain, then allots tokens to investors based on how much money they invest. Following the patterns of similar projects, Segal chose to retain 30 percent of her book’s token supply, with the rest owned by investors. One backer invested 5 ETH and earned 5,000 $NOVEL tokens; once the crowdfund was closed and the total number of tokens determined, that backer owned 14 percent of the token supply. If Segal eventually sells the complete book as an NFT,, that investor will earn 14 percent of the sale.
Think of NFTs like a pictographic way to ensure that one person is the only owner of a particular item—like how a deed ensures that you are the only person who owns your house. In this case, the NFT represents a book’s intellectual property—as in, whoever owns the NFT actually owns the rights to the book. If we’re imagining a world in which we can invest in Harry Potter, now imagine that once the series is complete, one person (or entity) could own it. As of 2021, estimates place the value of the Harry Potter franchise at $43 billion, but the NFT would likely go for much more than that. With books, movies, merchandise, and theme parks all using the Harry Potter IP, actually owning that IP would be very lucrative for the buyer.
In this scenario, owning a book becomes more like owning a Picasso: many can view it for a low fee, but only one (very rich) person truly owns it, increasing the value of their investment by loaning it out. Or think about it like a record label owning a musician’s masters: anyone can listen to the album on Spotify, but one (very rich) entity owns the masters and earns royalties on each stream. Books could operate the same way.
This is the future Alexandria Labs wants to create. “We were really inspired by the ancient patronage model where the wealthy classes would support the arts so that everyone can access it,” says co-founder Amelie Lasker. Hoping to be the “great library for the metaverse,” the platform will launch with a small library of NFT books that anyone can read, but few can collect.
“We want to try different tiers,” Lasker says. “Maybe there's a more accessible, more affordable version where it's just the ebook, and then there's a more expensive version that has original art or some kind signature from the author—or a unique piece the author has written into it that's only for that one copy. That creates rare books.”
This is potentially a lucrative strategy for the author who no longer has to rely on modest book sales, but instead can rely on large investments. Whether 100 or 100,000 people read the book is irrelevant—the book has value as a revenue-generating collectible on the marketplace. And unlike dealing art or owning music, with the use of smart contracts, the author can retain ownership of a certain percentage of her work, earning dividends alongside her investors every time the book is resold on the secondary market.
“One cool thing about this ebook model is that for the first time ever, secondary ebook markets are monetized,” Lasker’s co-founder Sonia Joseph says. “Right now, if someone were to buy a book, that's a one-time transaction. If they sell the book again, the author won’t earn a commission. But because it's a digital object that can be tracked, every time a book changes hands, the author is earning secondary royalties.”
Whether there is a large enough secondary market to generate revenue remains to be seen. “The resale of digital goods is a tricky legal and philosophical problem,” says Maja Thomas, chief innovation officer and director of business development and innovation at Hachette Livre. “What is a ‘used’ book in this NFT marketplace?”
To solve this challenge, several startups want to add value to being an owner. The publishing startup Paragraph sees “token gating” as one way to do this. In this case, an author could provide exclusive benefits to readers who reach a certain token threshold—like membership in a Discord community, a newsletter, or even real life benefits like merchandise, signed copies, and private events, further incentivizing readers to own a larger percentage of the book.
“As soon as the writer finally publishes their book, they can token-gate some special behind-the-scenes content, making it only accessible to these early supporters,” Paragraph founder Colin Armstrong says. “If a writer chooses, they could even allow these token-holders to participate in choosing the direction of the writer’s stories. The writer could token-gate a voting mechanism, and allow these early supporters to vote on how the written content should proceed.”
Would authors even be interested in writing and publishing this way? “Maybe the question should be: what kind of people, rather than authors,” Thomas says. “Most people are not interested in the risks and uncertainty around web3, but there will always be pioneers willing to explore a new frontier.”
Other publishing startups like Soltype see tipping pools as a way to reward readers for their patronage. The company is building a social reading platform where readers can “tip” authors, earning the ability to publicly highlight and comment on their books, as well as be part of a community with authors. The first 10 tippers earn 5 percent of the tipping revenue pool, with future tips split between the author (50 percent), the first 10 tippers (20 percent), and the owner of the book’s NFT (20 percent). Soltype takes the remaining 10 percent as service fee. In this way, readers can invest in a book and even earn revenue from its success.
“We envision some sort of social network web3 marketplace,” Soltype co-founder Juan Briceno says. “It has the community aspect and the marketplace aspect. It is user-friendly for readers, investors, and writers alike. And then, ideally, we have a model that rewards readers and buyers of the NFTs to ultimately promote the work of the author. We make building communities easier for authors.”
Wouldn’t you love to be one of the very first Harry Potter fans? To receive private access to the author’s community for owning a certain percentage of the book, or even to earn 5 percent of all future tips made to her Harry Potter series? Taking our far-flung example one step further: what if you could even write in the Harry Potter world—and make a living doing it?
Alexandria Labs sees a huge opportunity in fanfiction, a thriving ecosystem that has thus far been kept at arm’s length and even demonized by the publishing industry. The author Anne Rice, for one, once lambasted authors of Vampire Chronicles fanfiction. “I do not allow fan fiction,” the late author wrote in a statement on her website. “The characters are copyrighted. It upsets me terribly to even think about fan fiction with my characters. I advise my readers to write your own original stories with your own characters.”
In 2001, Fanfiction.net removed all Anne Rice fanfiction from their site, and some of Rice’s biggest fans felt alienated in the controversy. But fanfiction is how some writers get their start—for example, E. L. James’ 50 Shades of Grey started out as Twilight fanfiction—and for readers who want to keep reading in an author’s world, those stories can be a welcome respite, and a place to find a community of like-minded fans.
Right now these works exist in a gray area. On the fanworks platform Archive of Our Own (AO3), there are 355,595 works of Harry Potter fanfiction, including an especially prolific subcategory involving romantic trysts between the characters Draco and Hermione (affectionately nicknamed “Dramione”). Despite attracting thousands of readers, the authors of these stories cannot sell their work because of copyright law; Draco and Hermione belong to J.K. Rowling. But what if Rowling could sell her characters for use in fanfiction, and earn a percentage of the income every time someone else uses them?
“Harry Potter fanfiction would be a multi-billion dollar industry if it were monetized in that way,” Joseph says. “It's almost like software licenses—if I can import Hermione Granger into my story, she's literally a function, and the function is monetized and linked to a wallet. So if I make thousands of dollars on my story, maybe J.K. Rowling gets one percent of that, because I used Hermione in my story.”
Just because an author could get paid for fanfiction doesn’t mean they’ll want to. Surely numerous writers will agree with Rice, who was possessive of her characters regardless of how they were used. As her lawyer Christine Cuddy once said: “Even when done on a non-profit and/or amateur basis, such use of [Anne's] characters without Ms. Rice's permission constitutes copyright infringement.’” Still, with web3 technologies, fanfiction authors could earn a living from their work, the original author could receive credit and even financial gain, and investors could get a piece of the pie. Creatively, it colors in that gray area—generating a space for fans to be part of the creative process without infringing upon the original writer—and there are certainly authors who will be willing to experiment with that.
“That's something we're definitely interested in,” Joseph says. “We think it's a way to get people to create more, which is ultimately our goal, and be rewarded for those creations. So IP expansion is something that will be in the future of our company.”
If characters can be sold for use in fanfiction, Adim wants to take that idea one step further. Founded by Rob McElhenney, creator of It’s Always Sunny in Philadelphia and co-creator of Mythic Quest, and recently funded in a seed round by Andreessen Horowitz, the startup aims to make characters community-owned from the very beginning—before they’ve even been written into a book.
— Adim (@Adimverse) June 7, 2022
“NFTs allow characters to exist across any imaginable medium,” Andreesen’s Dixon wrote in a tweet about the investment. “The characters developed by creatives in the Adim Creator Rooms will be part of a shared world called @adimverse, and could live in games, TV shows, films, books, or in genres that haven’t even been invented yet.”
Adim plans to create new characters, then use those characters in original stories—possibly even books, thereby earning royalties for the creators of those NFTs each time they are used.
“Our first creator room will collaborate on developing four initial characters, and everyone involved in the creation of those characters will receive a Core Character NFT, granting them a stake in any future commercialization of those characters,” says Spencer Marell, chief community officer at Adim. “It will be up to the community where the characters go—they could be used in traditional formats like TV or in games, the metaverse, etc.”
If this is all starting to sound like a pipe dream, that’s because it is, for the time being. The players here are few and early. The platforms are complex and not at all user-friendly. Though the visions these founders have for the future are ambitious, as they exist now, I wouldn’t read a book on any of their platforms—not that any have a published full-length novel yet. Dozens of startups just like them are much further behind (and much less funded).
Perhaps the furthest along is Readl, whose publishing platform, currently in private beta, launched a trilogy called The Womanoid Diaries by the author Ava Lock in March 2022. “What we offer is a publishing platform where [the writer] creates universes,“ says Guerrero. “And we allow the authors (the IP owners) to sell part of their royalties to their communities via NFT shares.”
In Lock’s case, readers can buy an NFT that gives them access to royalty sharing, with readers earning 30 percent of the royalties she earns from ebook and NFT sales. Whenever Lock’s ebooks or NFTs are lent or resold, those who hold that royalty share NFT get their portion of that 30 percent royalty—a unique way to reward her biggest fans.
Although I was excited to take a peek, I couldn’t figure it out. I couldn’t connect to Readl’s app, and I had to DM the company and the author on Twitter to figure out a fix—apparently I was using an out of date Chrome extension for my crypto wallet (what readers use to “log in” to one of these platforms). Ultimately, the company had to deliver a patch. Even then, I couldn’t access the book because my wallet said Readl was using an “unknown network.”
“It feels really complicated to me at times too,” Lock admits. “The developers at Readl walked me through the smart contract to set this up right, but if I had to do it on my own, I don’t know if I could.”
Even if these platforms become more user-friendly (they’ll have to if they hope to attract business), none solve one of the biggest challenges facing the publishing industry right now: finding readers. Thus far, Lock has sold only four ebooks and earned the equivalent of $52.32 from her experiments at Readl—she’d have better luck on Amazon’s self-publishing platform. That’s not exactly a rallying cry to other novelists. I’m a fairly experimental writer who has crowdfunded fiction stories using ethereum and sold book chapters as NFTs, but although I see so much opportunity in this space, I will ultimately publish my first book to Kindle. Right now, it’s just where the readers are. To really affect the industry, one of these platforms will have to create a market of readers—essentially, they’ll have to become the next Kindle.
“Everyone wants an alternative to Amazon, and we're wondering if web3 provides an opportunity to make that alternative in a way that's financially viable.” Lasker says. If that happens, she continues, “this will disrupt publishing as we know it.”
The only startup poised to do that anytime soon is Wattpad. Five million writers currently contribute stories to this app, where 94 million users spend an hour reading every day—mostly Gen Z. If this is where the next generation is going to read, perhaps it’s also where they’ll go to invest.
“I’m not going to go in-depth, but what I will say is that we're working on a whole bunch of features that really help writers and readers connect directly on Wattpad,” Wattpad president Jeanne Lam tells me. “We're currently making exciting investments in how readers and writers find each other, how they reward each other… and yes, we are working on other ways that help writers monetize more directly from their incredible fanbases.”
Though Wattpad isn’t explicitly in the web3 world, they’re looking into it. “We want to disrupt ourselves before someone else does," says Cassidy Robertson, a product manager at Wattpad. “But like any new technology, we need to find a proven use case that can benefit writers. Because ultimately that’s our priority: building new tools and technologies that will help more writers build a career and share their voice with the world.”
If Kindle or Wattpad decide to enter the web3 space at the eleventh hour, they probably have the best chance of success for the sole reason that they have large markets of readers. Or perhaps traditional publishing houses will get involved and change the whole game. For instance: could a crypto-funded book later be published traditionally?
“Why not? Many books move from self to traditional publishing.” Thomas says. “But a would-be publisher must be aware of the rights and obligations embodied in the smart contracts and previous transactions.”
Thomas sees web3 publishing as more complementary than incompatible to the current publishing industry. “Like self-publishing, web3 publishing can and will co-exist with traditional publishing,” she says. “Web3 could indeed make it easier for passionate fans to participate in a new business model that supports authors. The question really is: do these projects help sell books and build the author’s fanbase? If so, publishers should be supportive.”
It’s a good question—and one without an answer. If there’s a future in which an author can crowdfund a book upfront, attract investors to it, sell a percentage of it, and even monetize their fanbase, all while retaining an ownership share in their work, it doesn’t exist yet. Moreover, the author doesn’t magically earn readers because of these things. A well-funded Picasso could just as easily hang in a closet as The Met.
“The interpersonal part is still as taxing in web3 as web2 or traditional publishing,” Segal says. “You still have to connect with people; you still have to promote your work; you still have to pound the pavement; you still have to make sure that what you're doing is appealing to people. It's not a magic wand.”
Even still, maybe someday it could be. Could the next Harry Potter be crowdfunded upfront? Could its biggest fans become investors? Could they contribute to its success by writing fanfiction and making fanart? Could they earn a profit if the book eventually becomes a film or theme park? Could this create a marketplace of readers, and ultimately prove to be a better strategy for readers and writers alike?
I don’t know. But as an author weighing my options for my next book, I sure hope so.
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